Health Sector Reform Technical Assistance Project (HSRTAP)

United States Agency for International Development

A Guidebook on the Preparation of a Hospital Strategic Business Plan

Table of Contents
Introduction The Business Plan What It Includes Description of the Business The Marketing Plan The Management Plan The Financial Management Plan The Business Plan Self-paced Activity Appendices 1 3 3 5 8 9 12 13

THE HOSPITAL BUSINESS PLAN OUTLINE

Introduction The Business Plan is a critical document to the transition of the hospital from a purely government subsidized health facility to its desired autonomous status. It serves as the blueprint for the hospitals desired directions, strengths and weaknesses, short- and longterm plans, finances, staffing, and capital goals and realities. The business plan is to be developed by the hospital management team for review and approval by the hospitals initial board of trustees during the early months of autonomous status. The Plan should address the objectives, plans, activities, and obstacles for the first year in significant detail and also provide a less specific but clearly defined vision and set of programs and activities for at least a five year horizon. The Plan must include both operations and capital (facilities) plans; must fully define the hospitals current centers of excellence (strengths) and its goals for intermediate and long-term improvement and upgrade; shall address in detail sources of funds and include financial projections; and should include an analysis of the medical staff. Below is an outline for a business plan. This model may serve as a guide when developing a business plan for a hospital or any health facility. What are the elements of a Business Plan? 1. Cover sheet 2. Statement of purpose 3. Table of contents THE BUSINESS a. b. c. d. e. f. g. Description of business Marketing Competition Operating procedures Personnel Business insurance Financial data

THE FINANCIAL DATA a. b. c. d. e. f. Loan applications Capital equipment and supply list Balance sheet Breakeven analysis Pro-forma income projections (profit & loss statements) Three-year summary

g. h. i. j.

Detail by month, first year Detail by quarters, second and third years Assumptions upon which projections were based Pro-forma cash flow (same breakdown as letter E)

OTHER SUPPORTING DOCUMENTS a. b. c. d. Copy of proposed lease or purchase agreement for building space Copy of licenses and other legal documents Copy of resumes of all principals Copies of letters of intent from suppliers, etc.

THE BUSINESS PLAN - WHAT IT INCLUDES What goes in a business plan? It is one that many new and potential business owners should ask, but oftentimes don't ask. The body of the business plan can be divided into four distinct sections: 1) the description of the business, 2) the marketing plan, 3) the financial management plan, and 4) the management plan. Addenda to the business plan should include the executive summary, supporting documents and financial projections. DESCRIPTION OF THE BUSINESS In this section, provide a detailed description of your business. An excellent question to ask is: "What business am I in?" In answering this question include the hospital services, products, and market as well as a thorough description of what makes the health facility unique. Remember, however, that as the business plan is developed, the initial question(s) may have to be modified or revised. The hospitals business description section is divided into three primary sections. Section 1 actually describes the business, Section 2 the product or service it offers or will be offering and Section 3 the business location, and why this location is desirable.

1.

Business Description

The business description shall contain the following: a. Legalities - business form: single-proprietorship, partnership, corporation or cooperative. This portion should also enumerate the licenses or permits needed by the health facility. Business type: merchandizing, manufacturing or service. What your product or service is. Is it a new independent business, a takeover, an expansion or a franchise? Why your business will be profitable. What are the growth opportunities? What would create an impact on your growth opportunities? When your business will be open (days, hours)? Quite obviously, most of the hospital departments will be operating on a 24-hour, 7-day a week schedule. But then there are also other departments (e.g. administrative) that will observe the normal 8 hours a day, five days a week schedule. What you have learned about your kind of business from outside sources (trade suppliers, bankers, other franchise owners, competitors, publications).

b. c. d. e. f.

g.

A cover sheet goes before the description. It includes the name, address and telephone number of the business and the names of all principals. In the description of your business, describe the unique aspects and how or why they will appeal to consumers. Emphasize any special features that you feel will appeal to customers and explain how and why these features are appealing. The description of your business should clearly identify goals and objectives and it should clarify why you are, or why you want to be, in business. As a government health facility that has been converted or will be converted into a government-owned and controlled corporation, the business description should include a history of the health facility and the rationale for adopting the new organizational form. 2. Product / Service

Try to describe the benefits of your goods and services from your customers' perspective. Successful business owners know or at least have an idea of what their customers want or expect from them. This type of anticipation can be helpful in building customer satisfaction and loyalty. And, it certainly is a good strategy for beating the competition or retaining your competitiveness. Describe: a. b. c. d. What (hospital) services are you offering. How your product or service will benefit the customer. Which products/services are in demand; if there will be a steady flow of cash. What is different about the product or service your business is offering.

3.

The Location

The location of your business can play a decisive role in its success or failure. Your location should be built around your customers, it should be accessible and it should provide a sense of security. Consider these questions when addressing this section of your business plan: a. b. c. d. What are your location needs? What kind of space will you need? Why is the area desirable? the building desirable? Is it easily accessible? Is public transportation available? Is street lighting adequate? e. Are market shifts or demographic shifts occurring? It may be a good idea to make a checklist of questions you identify when developing your business plan. Categorize your questions and, as you answer each question, remove it from your list.

THE MARKETING PLAN Marketing plays a vital role in successful business ventures. How well you market your hospital services, along with a few other considerations, will ultimately determine your degree of success or failure. The key element of a successful marketing plan is to know your customers--their likes, dislikes, expectations. By identifying these factors, you can develop a marketing strategy that will allow you to arouse and fulfill their needs. Identify your customers by their age, sex, income/educational level and residence. At first, target only those customers who are more likely to avail of your services or products. As your customer base expands, you may need to consider modifying the marketing plan to include other customers. Develop a marketing plan for your hospital business by answering these questions. Your marketing plan should be included in your business plan and contain answers to the questions outlined below. a. Who are your customers? Define your target market(s) They may be classified as indigent, medicare and private patients. Or they may even classified according to the medical cases. b. Are your markets growing? steady? declining? c. Is your market share growing? steady? declining? d. How is your market segmented? (e.g. diseases, health plans, age groups, professional groups) e. Are your markets large enough to expand? f. How will you attract, hold, increase your market share? g. How will you promote your services? h. What pricing strategy have you devised? Appendix I contains a sample Marketing Plan and Marketing Tips, Tricks and Traps, a condensed guide on how to market your product or service. Study these documents carefully when developing the marketing portion of your business plan. 1. Competition Competition is a way of life. We compete for jobs, promotions, scholarships to institutes of higher learning, in sports-and in almost every aspect of your lives. Nations compete for the consumer in the global marketplace as do individual business owners. Advances in technology can send the profit margins of a successful business into a tailspin causing them to plummet overnight or within a few hours. When considering these and other factors, we can conclude that business is a highly competitive, volatile arena. Because of this volatility and competitiveness, it is important to know your competitors.

Questions like these can help you: a. Who are your five nearest direct competitors? b. Who are your indirect competitors? (Indirect competitors may be the laboratories and small clinics in your area) c. How are their businesses: steady? increasing? decreasing? d. What have you learned from their operations? from their advertising? e. What are their strengths and weaknesses? f. How does their product or service differ from yours? You may want to start a file on each of your competitors. Keep envelopes or folders of their advertising and promotional materials and their pricing strategy techniques. Review these files periodically, determining when and how often they advertise, sponsor promotions and offer sales. If your competitors are using promotional materials, study the copy used in the advertising and promotional materials, and their sales strategy. For example, is their copy short? descriptive? catchy? or how much do they reduce prices for sales or services? Using this technique can help you to understand your competitors better and how they operate their businesses. 2. Pricing and Sales

Pricing strategy is another marketing technique you can use to improve your overall competitiveness. Get a feel for the pricing strategy your competitors are using. That way you can determine if your prices are in line with competitors in your market area and if they are in line with industry averages. Some of the pricing strategies are: a. b. c. d. e. f. g. retail cost and pricing competitive position pricing below competition pricing above competition price lining multiple pricing service costs and pricing (for service businesses only) o service components o material costs o labor costs o overhead costs

The key to success is to have a well-planned strategy, to establish your policies and to constantly monitor prices and operating costs to ensure profits. Even in a franchise where the franchisor provides operational procedures and materials, it is a good policy to keep abreast of the changes in the marketplace because these changes can affect your competitiveness and profit margins.

Appendix 1 contains a sample Price/Quality Matrix, review it for ideas on pricing strategies for your competitors. Determine which of the strategies they use, if it is effective and why it is effective. 3. Advertising, Public Relations and Social Marketing

How you advertise and promote your hospital services may make or break your business. Having a good product or service and not advertising and promoting it is like not having a business at all. Many business owners, including hospital operators, operate under the mistaken concept that the business will promote itself, and channel money that should be used for advertising and promotions to other areas of the business. Advertising and promotions, however, are the life line of a business and should be treated as such. Devise a plan that uses advertising and networking as a means to promote your business. Develop short, descriptive copy (text material) that clearly identifies your goods or services, its location and price. Use catchy phrases to arouse the interest of your readers, listeners or viewers. Remember the more care and attention you devote to your marketing program, the more successful your business will be. A more detailed explanation of the marketing plan and how to develop an effective marketing program is provided in the Workshop on Marketing. See Training Module 3 Marketing Your Business for Success.

THE MANAGEMENT PLAN Managing a business requires more than just the desire to be your own boss. It demands dedication, persistence, the ability to make decisions and the ability to manage both employees and finances. Your management plan, along with your marketing and financial management plans, sets the foundation for and facilitates the success of your business. Like plants and equipment, people are resources--they are the most valuable asset a business has. Employees and staff play an important role in the total operation of the hospital. Consequently, it's imperative that you know what skills you possess and those you lack since you will have to hire personnel to supply the skills that you lack. Additionally, it is imperative that you know how to manage and treat your employees. Make them a part of the team. Keep them informed of, and get their feedback regarding changes. Employees oftentimes have excellent ideas that can lead to new market areas, innovations to existing products or services or new product lines or services which can improve your overall competitiveness. Your management plan should answer questions such as: a. b. c. d. e. f. g. h. i. j. k. How does your background/business experience help you in this business? What are your weaknesses and how can you compensate for them? Who will be on the management team? What are their strengths/weaknesses? What are their duties? Are these duties clearly defined? What are your current personnel needs? What are your plans for hiring and training personnel? What salaries, benefits, vacations, holidays will you offer? What benefits, if any, can you afford at this point? What additional training programs may help improve your staff capabilities?

THE FINANCIAL MANAGEMENT PLAN Sound financial management is one of the best ways for your business to remain profitable and solvent. This is especially important for hospitals that seek to attain a certain degree of self sufficiency and autonomy. How well you manage the finances of your hospital will be a crucial factor in determining the success of your business operation. Each year thousands of potentially successful businesses fail because of poor financial management. Even hospitals are not exempted from this. As an owner / manager, you will need to identify and implement policies that will lead to and ensure that you will meet your financial obligations. To effectively manage your finances, plan a sound, realistic budget by determining the actual amount of money needed to open your business (start-up costs) and / or the amount needed to keep it open (operating costs). The first step to building a sound financial plan is to devise a start-up budget. Your start-up budget will usually include such one-timeonly costs as major equipment, utility deposits, down payments, etc. For existing government hospitals that will be converted into government corporate health facilities, the start-up costs should include the projected expenses to be incurred during the transition period. Some of these are professional fees for legal consultants, registration fees, personnel (e.g. for those who wish to avail of optional retirement or those who may be retrenched) and, even, some upgrading of facilities and equipment to be transferred to the new organization. The start-up budget should allow for these expenses. Start-up Budget a. b. c. d. e. f. g. h. i. j. k. l. m. n. personnel (costs prior to opening) legal/professional fees occupancy licenses/permits equipment insurance supplies advertising/promotions salaries/wages accounting income utilities payroll expenses (continuing) government subsidies for indigent patients

An operating budget is prepared when you are actually ready to open for business. The operating budget will reflect your priorities in terms of how you spend your money, the expenses you will incur and how you will meet those expenses (income). For government hospitals, the operating budget should include money to cover the first three years of operation. It should allow for the following expenses. Operating Budget a. b. c. d. e. f. g. h. i. j. k. l. m. n. o. personnel insurance rent depreciation loan payments advertising/promotions legal/accounting miscellaneous expenses supplies payroll expenses salaries/wages utilities dues/subscriptions/fees taxes repairs/maintenance

The financial section of your business plan should include any loan applications you've filed, a capital equipment and supply list, balance sheet, breakeven analysis, pro-forma income projections (profit and loss statement) and pro-forma cash flow. The income statement and cash flow projections should include a three-year summary, detail by month for the first year, and detail by quarter for the second and third years. The accounting system and the inventory control system that you will be using is generally addressed in this section of the business plan also. Whether you develop the accounting and inventory systems yourself or have an outside financial advisor develop the systems, you will need to acquire a thorough understanding of each segment and how it operates. A financial advisor can assist you in developing this section of your business plan. The following questions should help you determine the amount of start-up capital you will need to purchase and open a franchise. a. How much money do you have? b. How much money will you need for start-up? c. How much money will you need to stay in business?

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Other questions that you will need to consider are: a. What type of accounting system will you use? For government owned and controlled corporations, the accounting system prescribed by the Commission on Audit should be followed. b. What financial projections will you need to include in your business plan? c. What kind of inventory control system will you use? Your plan should include an explanation of all projections. Unless you are thoroughly familiar with financial statements, get help in preparing your cash flow and income statements and your balance sheet. Your aim is not to become a financial wizard, but to understand the financial tools well enough to gain their benefits. Your accountant or financial advisor can help you accomplish this goal.

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THE BUSINESS PLAN - SELF-PACED ACTIVITY

During this activity the hospital official (s) is expected to:

a. Briefly describe what goes into a business plan. b. Identify advantages of developing the marketing, management and financial management plans. c. List financial projections included in the financial management plan. d. Sketch an outline for a business plan.

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APPENDIX 1 MARKETING

1. THE MARKETING PLAN 2. PRICE/QUALITY MATRIX 3. MARKETING TIPS, TRICKS & TRAPS

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THE MARKETING PLAN This is the marketing plan of ABC General Hospital I. MARKET ANALYSIS

A. Target Market - Who are the customers? 1. We will be selling primarily to (check all that apply): Total Percent of Business a. b. c. d. Indigent Patients_______ Medicare Patients_______ Private _______ Other _______ ______ ______ ______ ______

2. We will be targeting customers by: a. Product line/services. b. We will target specific lines ________________ c. d. e. f. Geographic area? Which areas? ________________ Sales? We will target sales of ________________ Industry? Our target industry is ________________ Other? ________________

3. How much will our selected market spend on our type of product or service this coming year? P________________ B. Competition 1. Who are our competitors? NAME ________________________________________ ADDRESS _________________________________________ _________________________________________ Years in Business ___________________ Market Share ___________________ Price/Strategy ___________________ Product/Service Features ___________________

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NAME _________________________________________ ADDRESS _________________________________________ _________________________________________ Years in Business ____________________ Market Share ____________________ Price/Strategy ____________________ Product/Service Features ____________________ 2. How competitive is the market? High ____________________ Medium ____________________ Low ____________________ 3. List below your strengths and weaknesses compared to your competition (consider such areas as location, size of resources, reputation, services, personnel, special equipment, etc.): Strengths Weaknesses 1._______________________ 1._____________________ 2._______________________ 2._____________________ 3._______________________ 3._____________________ 4._______________________ 4._____________________ C. Environment 1. The following are some important economic factors that will affect our product or service (such as changes in government health policies, insufficient government funding, inefficient hospital referral system, slow repayment by health insurance organizations, trade area growth, industry health, economic trends, taxes, rising energy prices, etc.): ________________________________________________ ________________________________________________ ________________________________________________ 2. The following are some important legal factors that will affect our market: ________________________________________________ ________________________________________________ ________________________________________________ 3. The following are some important government factors: ________________________________________________ ________________________________________________ ________________________________________________

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4. The following are other environmental factors that will affect our market, but over which we have no control: ________________________________________________ ________________________________________________ ________________________________________________

II. PRODUCT OR SERVICE ANALYSIS A. Description 1. Describe here what the product/service is and what it does: ________________________________________________ ________________________________________________ ________________________________________________ B. Comparison 1. What advantages does our product/service have over those of the competition (consider such things as unique features, patents, expertise, special training, etc.)? __________________________________________________ __________________________________________________ __________________________________________________ 2. What disadvantages does it have? __________________________________________________ __________________________________________________ __________________________________________________ C. Some Considerations

1. Where will you get your materials and supplies? __________________________________________________ 2. List other considerations: __________________________________________________ __________________________________________________

III. MARKETING STRATEGIES - MARKET MIX A. Image 1. First, what kind of image do we want to have (such as cheap but good, or exclusiveness, or customer-oriented or highest quality, or convenience, or speed, or ...)? __________________________________________________

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B. Features 1. List the features we will emphasize: a. __________________________________________ b. __________________________________________ c. __________________________________________ C. Pricing 1. We will be using the following pricing strategy: a. Markup on cost ____ What % markup? _____ b. Suggested price ____ c. Competitive ____ d. Below competition ____ e. Premium price ____ f. Other ____ 2. Are our prices in line with our image? YES___ NO___ 3. Do our prices cover costs and leave a margin of profit? YES___ NO___

D. Customer Services 1. List the customer services we provide: a. ____________________________________________ b. ____________________________________________ c. ____________________________________________ 2. These are our sales/credit terms: a. ____________________________________________ b. ____________________________________________ c._____________________________________________ 3. The competition offers the following services: a. ____________________________________________ b. ____________________________________________ c. ____________________________________________

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E. Advertising/Promotion 1. These are the things we wish to say about the business: ____________________________________________________ ____________________________________________________ ____________________________________________________ 2. We will use the following advertising/promotion sources: a. b. c. d. e. f. g. h. i. j. Television ________ Radio ________ Direct mail ________ Personal contacts ________ Trade associations ________ Newspaper ________ Magazines ________ Yellow Pages ________ Billboard ________ Other___________

3. The following are the reasons why we consider the media we have chosen to be the most effective: __________________________________________________ __________________________________________________ __________________________________________________ __________________________________________________

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MARKETING TIPS, TRICKS & TRAPS 1. Marketing Steps Classifying Your Customers' Needs Targeting Your Customer(s) Examining Your "Niche" Identifying Your Competitors Assessing and Managing Your Available Resources Financial Human Material Production 2. Marketing Positioning Follower versus Leader Quality versus Price Innovator versus Adaptor Customer versus Product International versus Domestic Private Sector versus Government 3. Sales Strategy Use Customer-Oriented Selling Approach - By Constructing Agreement Phase One: Establish Rapport with Customer - by agreeing to discuss what the customer wants to achieve. Phase Two: Determine Customer Objective and Situational Factors - by agreeing on what the customer wants to achieve and those factors in the environment that will influence these results. Phase Three: Recommend a Customer Action Plan - by agreeing that using your product/ service will indeed achieve what customer wants. Phase Four: Obtaining Customer Commitment - By agreeing that the customer will acquire your product/service. Emphasize Customer Advantage Must be Read: When a competitive advantage can not be demonstrated, it will not translate into a benefit. Must be Important to the Customer: When the perception of competitive advantage varies between supplier and customer, the customer wins. Must be Specific: When a competitive advantage lacks specificity, it translates into mere puffery and is ignored. Must be Promotable: When a competitive advantage is proven, it is essential that your customer know it, lest it not exist at all.

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4. Benefits vs. Features The six "O's" of organizing Customer Buying Behavior a. b. c. d. e. f. ORIGINS of purchase: Who buys it? OBJECTIVES of purchase: What do they need/buy? OCCASIONS of purchase: When do they buy it? OUTLETS of purchase: Where do they buy it? OBJECTIVES of purchase: Why do they buy it? OPERATIONS of purchase: How do they buy it?

Convert features to benefits using the "...Which Means..." Transition Sales Maxim: "Unless the proposition appeals to their INTEREST, unless it satisfies their DESIRES, and unless it shows them a GAIN-then they will not buy!" Quality Customer Leads: Level of need Ability to pay Authority to pay Accessibility Sympathetic attitude Business history One-source buyer Reputation (price or quality buyer) CONVERT FEATURES INTO BENEFITS-THE "...WHICH MEANS..." TRANSITION FEATURES "WHICH MEANS" BENEFITS Performance Time Saved Reputation Reduced Cost Components Prestige Colors Bigger Savings Sizes Greater Profits Exclusive Greater Convenience Uses Uniform Production Applications Uniform Accuracy Ruggedness Continuous Output Delivery Leadership Service Increased Sales Price Economy of Use Design Ease of Use Availability Reduced Inventory Installation Low Operating Cost Promotion Simplicity Lab Tests Reduced Upkeep Terms Reduced Waste Workmanship Long Life

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BUYING MOTIVES RATIONAL EMOTIONAL Economy of Purchase Pride of Appearance Economy of Use Pride of Ownership Efficient Profits Desire of Prestige Increased Profits Desire for Recognition Durability Desire to Imitate Accurate Performance Desire for Variety Labor-Saving Safety Time-Saving Fear Simple Construction Desire to Create Simple Operation Desire for Security Ease of Repair Convenience Ease of Installation Desire to Be Unique Space-Saving Curiosity Increased Production Availability Complete Servicing Good Workmanship Low Maintenance Thorough Research Desire to be Unique Curiosity _________________________________________________________________ PRICE / QUALITY MATRIX SALES APPEALS PRICE/QUALITY HIGH MEDIUM LOW HIGH "Rolls Royce" "We Try Harder" "Best Buy" Strategy Strategy Strategy MEDIUM "Out Performs" "Piece of the Rock" "Smart Shopper" Strategy Strategy Strategy LOW "Feature Packed" "Keeps on Ticking" "Bargain Strategy Strategy Hunter" Strategy

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APPENDIX 2 FINANCIAL MANAGEMENT 1. Income Projection Statement Instructions for Income Projection Statement 2. Balance Sheet Instructions for Balance Sheet 3. Monthly Cash Flow Projection Instructions for Monthly Cash Flow Projection 4. Information Resources _________________________________________________________________ INCOME PROJECTION STATEMENT Industry J F M A M J J A S O N D Annual Annual % total % Total net sales (revenues) Costs of sales Gross profit Gross profit margin Controllable expenses Salaries/wages Payroll expenses Legal/accounting Advertising Automobile Office supplies Dues/Subscriptions Utilities Miscellaneous Total controllable expenses Fixed expenses Rent Depreciation Utilities Insurance License/permits Loan payments Miscellaneous Total fixed expenses Total expenses Net profit (loss) before taxes

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Taxes Net profit (loss) after taxes _________________________________________________________________ INSTRUCTIONS FOR INCOME PROJECTIONS STATEMENT The income projections (profit and loss) statement is valuable as both a planning tool and a key management tool to help control business operations. It enables the owner/manager to develop a preview of the amount of income generated each month and for the business year, based on reasonable predictions of monthly levels of sales, costs and expenses. As monthly projections are developed and entered into the income projections statement, they can serve as definite goals for controlling the business operation. As actual operating results become known each month, they should be recorded for comparison with the monthly projections. A completed income statement allows the owner/manager to compare actual figures with monthly projections and to take steps to correct any problems. Industry Percentage In the industry percentage column, enter the percentages of total sales (revenues) that are standard for your industry, which are derived by dividing Costs/expenses items x 100% total net sales These percentages can be obtained from various sources, such as trade associations, accountants or banks. The reference librarian in your nearest public library can refer you to documents that contain the percentage figures, for example, Robert Morris Associates' Annual Statement Studies (One Liberty Place, Philadelphia, PA 19103). Industry figures serve as a useful bench mark against which to compare cost and expense estimates that you develop for your firm. Compare the figures in the industry percentage column to those in the annual percentage column. Total Net Sales (Revenues) Determine the total number of units of products or services you realistically expect to sell each month in each department at the prices you expect to get. Use this step to create the projections to review your pricing practices. What returns, allowances and markdowns can be expected? Exclude any revenue that is not strictly related to the business. Cost of Sales The key to calculating your cost of sales is that you do not overlook any costs that you have incurred. Calculate cost of sales of all products and services used to determine total net sales. Where inventory is involved, do not overlook transportation costs. Also include any direct labor.

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Gross Profit Subtract the total cost of sales from the total net sales to obtain gross profit. Gross Profit Margin The gross profit is expressed as a percentage of total sales (revenues). It is calculated by dividing gross profits ______________ total net sales Controllable (also known as Variable) Expenses Salary expenses-Base pay plus overtime. Payroll expenses-Include paid vacations, sick leave, health insurance, unemployment insurance and social security taxes. Outside services-Include costs of subcontracts, overflow work and special or one-time services. Supplies-Services and items purchased for use in the business. Repair and maintenance-Regular maintenance and repair, including periodic large expenditures such as painting. Advertising-Include desired sales volume and classified directory advertising expenses. Car delivery and travel-Include charges if personal car is used in business, including parking, tools, buying trips, etc. Accounting and legal-Outside professional services. Fixed Expenses Rent-List only real estate used in business. Depreciation-Amortization of capital assets. Utilities-Water, heat, light, etc. Insurance-Fire or liability on property or products. Include workers' compensation. Loan repayments-Interest on outstanding loans. Miscellaneous-Unspecified; small expenditures without separate accounts. Net Profit (loss) (before taxes) - Subtract total expenses from gross profit. Taxes - Include inventory and sales tax, excise tax, real estate tax, etc. Net Profit (loss) (after taxes) - Subtract taxes from net profit (before taxes) Annual Total - For each of the sales and expense items in your income projection statement, add all the monthly figures across the table and put the result in the annual total column. Annual Percentage - Calculate the annual percentage by dividing Annual total x 100%

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___________________ total net sales Compare this figure to the industry percentage in the first column. _________________________________________________________________ BALANCE SHEET COMPANY NAME As of ____________________________, 19____ Assets Current assets Cash P_______ Petty cash P_______ Accounts receivable P_______ Inventory P_______ Short-term investment P_______ Prepaid expenses P_______ Long-term investment P_______ Fixed assets Land P_______ Buildings P_______ Improvements P_______ Equipment P_______ Furniture P_______ Automobile/vehicles P_______ Other assets 1. P_______ 2. P_______ 3. P_______ 4. P_______ Total assets P______ Liabilities Current Liabilities Accounts payable P______ Notes payable P______ Interest payable P______ Taxes payable Federal income tax P______ State income tax P______ Self-employment tax P______ Sales tax (SBE) P______ Property tax P______ Payroll accrual P______

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Long-term liabilities Notes payable P______ Total liabilities P______ Net worth (owner equity) P______ Proprietorship or Partnership (name's) equity P_____ (name's) equity P_____ or Corporation Capital stock P_____ Surplus paid in P_____ Retained earnings P_____ Total net worth P_____ Total liabilities and total net worth P_____ (Total assets will always equal total liabilities and total net worth) ________________________________________________________________ INSTRUCTIONS FOR BALANCE SHEET Figures used to compile the balance sheet are taken from the previous and current balance sheet as well as the current income statement. The income statement is usually attached to the balance sheet. The following text covers the essential elements of the balance sheet. At the top of the page fill in the legal name of the business, the type of statement and the day, month and year. Assets List anything of value that is owned or legally due the business. Total assets include all net values. These are the amounts derived when you subtract depreciation and amortization from the original costs of acquiring the assets. Current Assets Cash-List cash and resources that can be converted into cash within 12 months of the date of the balance sheet (or during one established cycle of operation). Include money on hand and demand deposits in the bank, e.g., checking accounts and regular savings accounts. Petty cash-If your business has a fund for small miscellaneous expenditures, include the total here. Accounts receivable-The amounts due from customers in payment for merchandise or services. Inventory-Includes raw materials on hand, work in progress and all finished goods, either manufactured or purchased for resale.

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Short-term investments-Also called temporary investments or marketable securities, these include interest- or dividend-yielding holdings expected to be converted into cash within a year. List stocks and bonds, certificates of deposit and time-deposit savings accounts at either their cost or market value, whichever is less. Prepaid expenses-Goods, benefits or services a business buys or rents in advance. Examples are office supplies, insurance protection and floor space. Long-term Investments Also called long-term assets, these are holdings the business intends to keep for at least a year and that typically yield interest or dividends. Included are stocks, bonds and savings accounts earmarked for special purposes. Fixed Assets Also called plant and equipment. Includes all resources a business owns or acquires for use in operations and not intended for resale. Fixed assets may be leased. Depending on the leasing arrangements, both the value and the liability of the leased property may need to be listed on the balance sheet. Land-List original purchase price without allowances for market value. Buildings Improvements Equipment Furniture Automobile/vehicles Liabilities Current Liabilities List all debts, monetary obligations and claims payable within 12 months or within one cycle of operation. Typically they include the following: Accounts payable-Amounts owed to suppliers for goods and services purchased in connection with business operations. Notes payable-The balance of principal due to pay off short-term debt for borrowed funds. Also includes the current amount due of total balance on notes whose terms exceed 12 months. Interest payable-Any accrued fees due for use of both short- and long-term borrowed capital and credit extended to the business. Taxes payable-Amounts estimated by an accountant to have been incurred during the accounting period. Payroll accrual-Salaries and wages currently owed. Long-term Liabilities Notes payable-List notes, contract payments or mortgage payments due over a period exceeding 12 months or one cycle of operation. They are listed by outstanding balance less the current position due.

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Net worth Also called owner's equity, net worth is the claim of the owner(s) on the assets of the business. In a proprietorship or partnership, equity is each owner's original investment plus any earnings after withdrawals. Total Liabilities and Net Worth The sum of these two amounts must always match that for total assets. ___________________________________________________________ MONTHLY CASH FLOW PROJECTION Name of Business Owner Type of Business Prepared by Date Pre-start- 1 2 3 4 5 6 Total up position Columns 1-6 Year Month Est.* Act.* Est.Act. Est.Act. Est.Act. Est.Act. Est.Act. Est.Act. Est.Act. 1. Cash on hand (beginning month) 2. Cash receipts (a) Cash sales (b) Collections from credit accounts (c) Loan or other cash injections (specify) 3. Total cash receipts (2a+2b+2c=3) 4. Total cash available (before cash out) (1+3) 5. Cash paid out (a) purchases (merchandise) (b) Gross wages (excludes withdrawals) (c) Payroll expenses (taxes, etc.) (d) Outside services (e) Supplies (office and operating) (f) Repairs and maintenance (g) Advertising (h) Car, delivery and travel (i) Accounting and legal (j) Rent (k) Telephone (l) Utilities (m) Insurance (n) Taxes (real estate, etc.) (o) Interest (p) Other expenses (specify each) (q) Miscellaneous (unspecified)

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(r) Subtotal (s) Loan principal payment (t) Capital purchases (specify) (u) Other start-up costs (v) Reserve and/or escrow (specify) (w) Owner's withdrawal 6. Total cash paid out (5a through 5w) 7. Cash position (end of month) (4 minus 6) Essential operating data (non-cash flow information) A. Sales volume (dollars) B. Accounts receivable (end on month) C. Bad debt (end of month) D. Inventory on hand (end of month) E. Accounts payable (end of month) _________________________________________________________________ INSTRUCTIONS FOR MONTHLY CASH FLOW PROJECTION 1. Cash on hand (beginning of month) -- Cash on hand same as (7), Cash position, pervious month 2. Cash receipts(a) Cash sales-All cash sales. Omit credit sales unless cash is actually received (b) Gross wages (including withdrawals)-- Amount to be expected from all accounts. (c) Loan or other cash injection-Indicate here all cash injections not shown in 2(a) or 2(b) above. 3. Total cash receipts (2a+2b+2c=3) 4. Total cash available (before cash out)(1+3) 5. Cash paid out (a) Purchases (merchandise)--Merchandise for resale or for use in product (paid for in current month). (b) Gross wages (including withdrawals)--Base pay plus overtime (if any) (c) Payroll expenses (taxes, etc.)-- Include paid vacations, paid sick leave, health insurance, unemployment insurance, (this might be 10 to 45% of 5(b)) (d) Outside services-This could include outside labor and/or material for specialized or overflow work, including subcontracting (e) Supplies (office and operating)--Items purchased for use in the business (not for resale) (f) Repairs and maintenance-Include periodic large expenditures such as painting or decorating (g) Advertising-This amount should be adequate to maintain sales volume (h) Car, delivery and travel-If personal car is used, charge in this column, include parking (i) Accounting and legal-Outside services, including, for example, bookkeeping (j) Rent-Real estate only (See 5(p) for other rentals) (k) Telephone (l) Utilities-Water, heat, light and/or power

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(m) Insurance-Coverage on business property and products (fire, liability); also worker's compensation, fidelity, etc. Exclude executive life (include in 5(w)) (n) Taxes (real estate, etc.)-- Plus inventory tax, sales tax, excise tax, if applicable (o) Interest-Remember to add interest on loan as it is injected (See 2 above) (p) Other expenses (specify each) _______________________________________________ Unexpected expenditures may be included here as a safety factor__________________ Equipment expenses during the month should be included here (non-capital equipment)____________________ When equipment is rented or leased, record payments here (q) Miscellaneous (unspecified)--Small expenditures for which separate accounts would be practical (r) Subtotal-This subtotal indicates cash out for operating costs (s) Loan principal payment-Include payment on all loans, including vehicle and equipment purchases on time payment (t) Capital purchases (specify)--Nonexpensed (depreciable) expenditures such as equipment, building purchases on time payment (u) Other start-up costs-Expenses incurred prior to first month projection and paid for after start-up (v) Reserve and/or escrow (specify)-- Example: insurance, tax or equipment escrow to reduce impact of large periodic payments (w) Owner's withdrawals-Should include payment for such things as owner's income tax, social security, health insurance, executive life insurance premiums, etc. 6. Total cash paid out (5a through 5w) 7. Cash position (end on month) (4 minus 6)-- Enter this amount in (1) Cash on hand following monthEssential operating data (non-cash flow information)--This is basic information necessary for proper planning and for proper cash flow projection. Also with this data, the cash flow can be evolved and shown in the above form. A. Sales volume (dollars)--This is a very important figure and should be estimated carefully, taking into account size of facility and employee output as well as realistic anticipated sales (actual sales, not orders received). B. Accounts receivable (end of month)-- Previous unpaid credit sales plus current month's credit sales, less amounts received current month (deduct "C" below) C. Bad debt (end on month)-- Bad debts should be subtracted from (B) in the month anticipated D. Inventory on hand (end on month)-- Last month's inventory plus merchandise received and/or manufactured current month minus amount sold current month E. Accounts payable (end of month) Previous month's payable plus current month's payable minus amount paid during month. F. Depreciation-Established by your accountant, or value of all your equipment divided by useful life (in months) as allowed by Internal Revenue Service

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COMPILATION OF HOSPITAL INSTITUTIONAL IMPROVEMENT INTERVENTIONS Draft Only (27 December 2000)

PREPARED BY THE HOSPITAL REFORMS TEAM HEALTH SECTOR REFORM TECHNICAL ASSISTANCE PROJECT

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